BSP: Consumer prices not seen to rise after ‘Glenda’

AFP FILE PHOTO

MANILA, Philippines–Typhoon Glenda is not expected to cause consumer prices to shoot up, the central bank said, noting that early indications were that the damage was “substantially less” than expected in Metro Manila.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said forecasts still showed that inflation targets remained “safe as of now.”

“From what we have seen and from what the NDRRMC (Natural Disaster Risk Reduction and Management Council) has reported, it looks like the effect of Glenda was substantially less than stronger typhoons in recent years,” Tetangco told reporters at the weekend.

“We will have to see the estimates when they become available and evaluate the impact,” he said.

Tight supply

Inflation for June remained at 4.4 percent, although slower than May’s 4.5 percent, due mainly to the tight supply of food in the country as a result of the damage caused by Super Typhoon Yolanda in November last year.

Typhoon Pablo, which hit the country in October, also damaged farmlands, contributing to higher commodity prices.

Typhoons have been a perennial problem for monetary authorities, given the effects of natural disasters on crops and supply chains across the country.

Data from the NDRRMC showed that Glenda caused P1 billion worth of damage to infrastructure. About P4.8 billion in crops were affected.

Not threatening

The central bank chief said that at the moment, inflation was still expected to fall within the BSP’s official target range of 3 to 5 percent for the year. Next year, inflation is expected to decelerate to around 3 percent, but would remain above the midpoint of the target of 2 to 4 percent.

“I don’t think (this typhoon) will threaten the target,” he said. “We’ll still be able to remain within the target for this year as well as the next.”

More idle money

At its last three policy meetings, the BSP’s Monetary Board decided to move to siphon off liquidity from the system. In April and May, banks were told to set aside more of their clients’ deposits as reserves, and in June, rates for special deposit accounts (SDA) were hiked across all maturities. This is expected to encourage banks to keep more money idle by parking it in central bank vaults.

These moves are aimed at curbing excess demand fuelled by excess cash to offset the effects of tight food supply on overall consumer prices.